Allowing Australians to access super to pay for first home would blow multibillion-dollar hole in budget, modelling finds

The Coalition is proposing to expand its superannuation for housing policy, including to allow first home buyers to withdraw more than the $50,000 proposed before the 2022 election. Photograph: Glenn Hunt/AAP

Letting Australians access superannuation to buy their first home would blow a hole of up to $2.5bn a year in the budget by the end of the decade, according to Deloitte modelling for the super industry.

The modelling for the Super Members Council, released on Thursday, shows a mounting annual and cumulative cost to the budget primarily from more people relying on the aged pension due to lower super balances at retirement.

Deloitte found a couple comprised of two 30-year-olds who withdrew $35,000 each from their super could retire with about $195,000 less in today’s dollars.

Such a couple could be expected to receive $3,270 more a year from the aged pension, costing $88,400 to the budget over their lifetime.

In March Guardian Australia revealed the Coalition is proposing to expand its super for housing policy, including to allow first home buyers to withdraw more than the $50,000 proposed before the 2022 election.

This sets up a major policy fight with the Albanese government, which argues the policy will undermine the purpose of super and increase house prices.

Deloitte modelled two scenarios: one in which first home buyers can withdraw the lower of 40% or $50,000 of their superannuation for a house deposit; and a second with no cap on the amount they can withdraw.

It found that, under the capped scenario, access to super would cost the budget $320m a year in 2030, rising to more than $3bn a year in 2060, by which time the cumulative cost of the policy would be $40bn.

In the uncapped scenario, access to super would cost the budget $2.5bn a year by 2030, rising to $15bn a year by the mid-2060s, by which time the cumulative cost of the policy would be $200bn.

The Deloitte model assumed that over the medium to long term 87% of first home buyers would access the scheme, a figure based on access to New Zealand’s KiwiSaver scheme to buy a house.

It assumed a first home buying household (with an average of 1.7 people) would withdraw about $60,000 under the capped scenario and $140,000 under the uncapped scenario.

Earlier Super Members Council modelling has claimed that letting first home buyers access up to $50,000 could cause price rises of between $69,000 to $86,000 in major capital cities of Sydney, Melbourne, Brisbane and Perth.

The Super Members Council chief executive, Misha Schubert, said using super for housing was “economically reckless”.

“It sets a policy trap for young Australians because it hikes house prices and blows a budget blackhole in the decades ahead mostly by pushing up age pension costs – which every taxpayer would pay,” she said.

“Ideas to break the seal on super just leave people with less savings in retirement and a bigger bill for all taxpayers.”

The Coalition’s shadow assistant minister for housing affordability, Andrew Bragg, has argued it is unfair not to allow millennials access to tens of thousands of their super, given the average deposit in Sydney is $150,000.

In April Guardian’s Essential poll found majority support for a range of more radical solutions to housing unaffordability including super for housing, the Greens’ public sector property developer, Labor’s shared equity scheme, and tackling housing tax concessions.